Correlation Between Frontier Markets and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both Frontier Markets and Hennessy Japan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Frontier Markets and Hennessy Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Markets Portfolio and Hennessy Japan Small, you can compare the effects of market volatilities on Frontier Markets and Hennessy Japan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Frontier Markets with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Markets and Hennessy Japan.
Diversification Opportunities for Frontier Markets and Hennessy Japan
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Frontier and HENNESSY is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Markets Portfolio and Hennessy Japan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan Small and Frontier Markets is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Frontier Markets Portfolio are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan Small has no effect on the direction of Frontier Markets i.e., Frontier Markets and Hennessy Japan go up and down completely randomly.
Pair Corralation between Frontier Markets and Hennessy Japan
Assuming the 90 days horizon Frontier Markets is expected to generate 1.12 times less return on investment than Hennessy Japan. But when comparing it to its historical volatility, Frontier Markets Portfolio is 2.05 times less risky than Hennessy Japan. It trades about 0.06 of its potential returns per unit of risk. Hennessy Japan Small is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,665 in Hennessy Japan Small on September 4, 2024 and sell it today you would earn a total of 101.00 from holding Hennessy Japan Small or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Frontier Markets Portfolio vs. Hennessy Japan Small
Performance |
| Timeline |
| Frontier Markets Por |
| Hennessy Japan Small |
Frontier Markets and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Markets and Hennessy Japan
The main advantage of trading using opposite Frontier Markets and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Markets position performs unexpectedly, Hennessy Japan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hennessy Japan will offset losses from the drop in Hennessy Japan's long position.| Frontier Markets vs. Frontier Markets Portfolio | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Small |
| Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Frontier Markets Portfolio |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |